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Getting a Personal Loan With a Cosigner

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Personal loan funds can be used for a variety of reasons, including consolidating debt, financing a car or paying for your wedding. As an unsecured loan, you don’t need collateral to be eligible. But lenders will heavily rely on your credit to determine whether you qualify for a personal loan.

Getting a personal loan with a cosigner can make it easier for you to qualify. A cosigner is someone who agrees to repay your debt if you fail to; they’re equally responsible for the debt. If your cosigner has better credit or a higher income than you do, then you might be eligible for better loan terms and interest rates than if you’d applied alone.

If you are looking to apply for a loan with a cosigner, the first step is understanding your options. Here’s our list of what you need to know.
What does it mean to be a cosigner?
Pros and cons of applying for a loan with a cosigner
How to get a personal loan with a cosigner
How to find a cosigner
Joint personal loan vs. a personal loan with a cosigner

What does it mean to be a cosigner?

If you’re getting a cosigner for a personal loan, both you and the cosigner should know precisely what that means. After all, they’re not just vouching for you, they’re signing on for the loan, too.

  • Cosigners are equally responsible for the debt:If you fail to make payments, the lender can go after the cosigner for payments. And if you default on the loan, the lender can choose to sue the cosigner for the entirety of the debt, plus fees.
  • If you fail to make payments, their credit will suffer: An important factor in your credit score is your payment history. If you don’t make on-time and in-full payments, both your and your cosigner’s credit are likely to take a hit.
  • The loan will appear on their credit reports: Although the likely plan is that your cosigner won’t be making payments, the debt will still appear on their credit reports. This can affect their ability to obtain other loans, as their debt-to-income ratio will be affected.
  • Cosigners often can’t be taken off the loan: If your cosigner no longer wants to be on the loan, you’ll likely need to refinance. That means taking out a new loan on your own to pay off the old debt. However, some lenders offer a cosigner release program, which allows you to remove the cosigner from a loan if you’ve met certain conditions, such as making a number of consecutive payments on time and in full.

Pros and cons of applying for a loan with a cosigner

Having a cosigner can allow you to access more competitive loan terms. But your cosigner should be well aware of the inherent risks that come with cosigning a personal loan. And you should take care to alleviate any concerns they have. For example, you may share financial information with your potential cosigner that shows you can reliably repay the loan without help.

Pros vs. cons of applying for a loan with a cosigner
Pros Cons
  • Get approved with lenders you might not otherwise qualify for
  • Your cosigner is responsible for payments if you can’t make them on time
  • May receive a better interest rate and more desirable loan terms
  • Missed and late payments will affect both your and your cosigner’s credit scores
  • Improve your own credit score by making regular payments with credit you may not have otherwise received
  • Removing a cosigner from the loan can be difficult

How to get a personal loan with a cosigner

The process of getting a personal loan with a cosigner is a little different than when you’re applying by yourself. Here’s a step-by-step breakdown of the process.

  1. Gather your own financial information: First, you should check your own three-digit, FICO® credit score, which is the credit score lenders use when determining if you qualify for a personal loan. (You can do this using LendingTree‘s app, among other methods.) You should also take stock of your debt-to-income ratio, your current employment status and your payment history.
  2. Collect your cosigner’s information: You’ll also need to gather your cosigner’s information, including their income and three-digit FICO credit score. This way, you’ll have an idea of what interest rates and terms you may be eligible for with your cosigner’s help.
  3. Compare lenders and get prequalified: Now it’s time to compare lenders. Not all lenders accept cosigners (but these do), so you’ll need to do some upfront research. When you find a few lenders you like, you’ll apply for prequalification. You and your cosigner will enter basic personal and financial information, and submit to a soft credit check, which won’t affect your credit scores. If you prequalify, the lender will show you the kind of loan terms you may receive. (You can use LendingTree, which is a loan marketplace, to explore multiple lenders and loan offers at once, depending on your eligibility.)
  4. Comparing loan offers: Pay attention to the loan APR, which is an accurate measure of your loan cost. Review lender fee structures, as well as available repayment terms and borrowing limits. These factors can help you determine which lender may be your best option.
  5. Pick your favorite offer and formally apply: After you’ve found your favorite loan offer, you can officially apply. This requires you and your cosigner to send more information to the lender, including copies of paycheck stubs and bank account statements. You’ll also each submit to a hard credit check, which will result in a small ding to your credit. Using this information, the lender will decide whether they’d like to formally offer you and your cosigner a loan, and under which terms
  6. Receive your money: Lenders are often able to make decisions within hours after receiving all of your financial info — but many take longer. That’s why it’s worth checking with your lender in advance, as some will advertise near-instant approval but others may require a couple of days for approval. If approved for a loan, you’ll coordinate with your lender on how to receive funds. In most cases, you’ll receive funds via electronic deposit
  7. Make payments on your loan: You and the cosigner will be equally responsible for the personal loan. If you fall behind on payments, both your and your cosigner’s credit will take a hit, and the lender can go after the cosigner for payments. So stay on top of your monthly payments.

How to find a cosigner

Finding a cosigner isn’t always easy. For example, people with good credit — who often make for good cosigners — may not want to risk a potential hit to their credit score by signing onto another person’s loan. That’s why it’s a good idea to ask people who trust you, like close friends and family members.

If that doesn’t work, there are a few other options. You can find a cosigner online, but those services are often difficult to trust and often come with major downsides. For example, you may be charged fees and you may be matched with a cosigner that asks for a portion of your loan in exchange for their help.

Ultimately, it’s likely better to find a cosigner you know and trust. Just make sure they understand their obligations to the loan before they agree.

Can you have a cosigner who lives out of state?

Not all lenders allow out-of-state cosigners, but many do. Several major banks, such as PNC Bank and Wells Fargo Bank, have no issue with your cosigner living in another state, however it’s always best to check with a lender before applying.

Joint personal loan vs. a personal loan with a cosigner

A joint personal loan is not the same as using a cosigner. When you apply for a joint personal loan, both you and your co-borrower will own the item, vehicle or property that the money you receive goes toward.
That’s not the case with a cosigner. In that situation, your cosigner takes on responsibility for ensuring the loan is paid, but they don’t receive any ownership of what you purchase with the money.

Key differences between a joint personal loan and a cosigned personal loan
Joint personal loan Cosigned personal loan
  • Both parties benefit from the loan itself
  • The cosigner does not benefit financially from the loan
  • Multiple sources of income can go toward payments
  • You make payments by yourself, unless you’re unable to afford them
  • Great for couples and people who want to work together on making payments toward a common goal
  • Great for those who need help qualifying for a loan

There’s a lot to consider before deciding whether to apply for a loan with a cosigner. It depends on your credit score, your income and who your potential cosigner might be. There’s also a lot to evaluate based on your cosigner’s financial situation.

But using a cosigner can be a great way to get a personal loan with better interest rates, or to qualify for options you may not have by yourself. If it seems like the right fit, always make sure you compare rates and pick the loan that seems ideal for you.


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